ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (“Agreement”) is made as of December __, 2005, by and between Tri-State Employment Service, Inc. , a New York corporation (“Buyer”) with its principal business offices located at 160 Broadway, 10 ^th Floor, New York, New York 10038, and Stratus Services Group, Inc. , a Delaware corporation (“Seller”) with its principal business offices located at 500 Craig Road, Suite 201, Manalapan, New Jersey 07726.

WHEREAS, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer certain of the properties, rights, assets and business of the Seller, all upon and subject to the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.    Purchase and Sale and Delivery of the Assets.

1.1.    Purchase and Sale and Delivery of the Assets.

(a)    Purchased Assets . Subject to and upon the terms and conditions of this Agreement and excluding the assets retained by the Seller as set forth in Section 1.1(b) herein, as of the “Closing Date” (as defined in Section 1.5 below), the Seller shall sell, transfer, convey, assign and deliver, to the Buyer, and the Buyer shall purchase from the Seller, free and clear of all liens and encumbrances (except for Permitted Liens as defined in Section 2.8), all of the properties, rights, assets and business as a going concern, of every kind and nature, real, personal or mixed, tangible or intangible, wherever located, which are owned, leased, licensed or used by Seller in the conduct of its business at its offices located in Bellflower, California and West Covina, California (collectively, the “CA Branch Offices”) and which exist on the “Closing Date” (collectively, the “Purchased Assets”), including, without limitation, the following assets:

(i)    all office supplies and similar materials (the “Supplies”);

(ii)    all contracts, agreements, leases, arrangements and/or commitments of any kind, whether oral or written, relating to the geographic area serviced by the CA Branch Offices as set forth on Schedule 2.12 attached hereto (the “Contracts”);

(iii)    all customer lists, files, records and documents (including credit information) relating to the geographic area serviced by the CA Branch Offices and all other business, financial and employee books, records, files, documents, reports and correspondence relating to the Purchased Assets, including records relating to accounts receivable (collectively, the “Records”);

(iv)    all rights of the Seller, if any, under express or implied warranties from the suppliers of the Seller in connection with the Purchased Assets;

(v)    all furnishings, furniture, fixtures, tools, machinery, equipment and leasehold improvements owned by the Seller and related to the Purchased Assets, whether or not reflected as capital assets in the accounting records of the Seller (collectively, the “Fixed Assets”), as set forth on Schedule 2.8; and

(vi)    all computers, computer programs, computer databases, hardware and software owned or licensed by the Seller and used in connection with the Purchased Assets, but not to include any proprietary software of Seller;

(vii)    the right to use any forms, processes and solutions developed by and for Seller and employed by Seller, on or prior to the Closing Date, in operating the CA Branch Offices;

(viii)    all municipal, state and federal franchises, licenses, authorizations and permits of the Seller which are necessary to operate or are related to the Purchased Assets;

(ix)    all prepaid charges,   deposits, sums and fees   of Seller relating to the Purchased Assets;

(x)    all claims and rights of Seller related to or arising from the Purchased Assets;

(xi)    all accounts receivable and other receivables, whether or not billed;

(xii)    all telephone and facsimile numbers; and

(xiii)    all of the goodwill of the CA Branch Offices.

(b)    Retained Assets . Notwithstanding anything to the contrary set forth in this Agreement, the following assets of the Seller are not included in the sale of Purchased Assets contemplated hereby: (i) the cash and cash equivalents, chattel papers (including electronic chattel paper), instruments (including promissory notes), (ii) the Purchase Price (as hereinafter defined) and the other rights of the Seller under or relating to this Agreement, (iii) the corporate minute books, stock records, qualification to conduct business as a foreign corporation, and other documents relating to the formation, maintenance or existence as a corporation of the Seller, except that Seller agrees that it will provide copies of any such document from the corporate minute books as reasonably requested by the Buyer which the Buyer believes are necessary for the use and operation of the Purchased Assets after the Closing Date, (iv) motor vehicles, (v) all properties, rights, assets and services related to the conduct of Seller’s business at all of its other offices nationwide and all information, documents and files relative thereto; and (vi) all properties, rights, assets and services related to the conduct of Seller’s business at any of its other offices and locations throughout the United States.

1.2.    Purchase Price and Other Payments.

(a)    The purchase price for the Purchased Assets (the “Purchase Price”) shall be paid by Buyer to Seller as an earnout as follows: (i) two percent (2%) of sales of the CA Branch Offices for the first twelve months from the Closing Date; (ii) one percent (1%) of sales of the CA Branch Offices for the second twelve months from the Closing Date; and (iii) one percent (1%) of sales of the CA Branch Offices for the third twelve months from the Closing Date. The earnout on collected sales will be based on the sales to existing customers of the CA Branch Offices as of the Closing Date set forth on Schedule 2.25 hereto.

(b)    Such payments pursuant to clause (a) above shall be paid as follows: (i) the first such payment shall be made with respect to the payroll period ended on the December 4, 2005 and payroll period ending on December 18, 2005 (ii) through January 29, 2006, payments shall be made with respect to bi-weekly periods; and (iii) thereafter on a weekly basis. All payments shall be made in immediately available funds within 5 days following the end of the applicable period. All payments will be accompanied by a certificate of an officer of Buyer certifying that all information which formed the basis for calculating the remittance to Seller is true and correct.

(c)    Notwithstanding anything herein to the contrary, the aggregate amount payable pursuant to clause (a) above with respect to any period for any existing client shall equal 2% or 1%, as the case may be, of sales to such clients as provided in clause (a) above, but in no event for purposes of this calculation, shall the aggregate annual sales to such clients exceed $25 million.

(d)    On or before April 15, 2006, Buyer shall prepare a reconciliation reflecting collections from accounts receivable included in the Purchased Assets. To the extent collections for such accounts receivable are less than invoiced sales, Buyer will be entitled to offset against future payments to Seller an amount equal to 2% or the amount of such shortfall. If, after April 15, 2006 Buyer collects any amounts reflected on its reconciliation as being uncollected, Buyer will remit to Seller 2% of such additional collections.

(e)    At reasonable times and upon reasonable notice, Seller shall have access to Buyer’s records solely for the purpose of reviewing Buyer’s sales and its computation of the remittances of Purchase Price as described in this Section 1.2.

1.3.    Assumption of Liabilities.

(a)    Assumed Liabilities . Effective as of the Closing Date, the Buyer agrees to assume and to pay, perform and discharge all liabilities and obligations arising under the Contracts on and after the Closing Date, and with respect to the use and operation of the Purchased Assets by the Buyer after the Closing Date (the “Assumed Liabilities”). The Buyer hereby agrees that it shall pay all payroll obligations, including withholding taxes and workers compensation insurance premiums, for all persons employed at the CA Branch Offices from and after December 6, 2005, and such obligations shall be deemed to be included in Assumed Liabilities. To the extent that any personal property or real property included as part of the Purchased Assets is leased by Seller as of the Closing Date and the Buyer and Seller agree that such personal property lease agreement or real property lease agreement cannot be formally assigned to the Buyer as of the Closing Date, the Buyer will thereafter pay the rental charge or lease payment for same to the Seller, and the Seller shall be required to make such payments directly to the lessor; provided that Buyer shall use commercially reasonable efforts to cause each such lease to be formally assigned to Seller following the Closing. Assumed Liabilities shall also include liabilities to employees for accrued, unpaid compensation, including but not limited to vacation, paid time off and sick pay in excess of $20,000.00.

(b)    Liabilities Retained by the Seller . Except for the Assumed Liabilities, the Buyer shall not assume, be liable for or pay, and none of the Purchased Assets shall be subject to, and the Seller shall retain, be unconditionally liable for and pay, any liability or obligation (whether known or unknown, matured or unmatured, stated or unstated, recorded or unrecorded, fixed or contingent, currently existing or hereafter arising) of the Seller, without limitation, the following:

(i)    any obligation or liability of Seller arising out of this Agreement, any agreement entered into in connection herewith or the transactions contemplated hereby or thereby;

(ii)    except as otherwise provided herein, any obligation or liability of Seller for the fees and expenses of its counsel, accountants and other experts and all other expenses incurred by Seller incident to the negotiation, preparation and execution of this Agreement and any agreement entered into in connection herewith and the performance by Seller of its obligations hereunder or thereunder;

(iii)    except as otherwise provided herein, any obligation or liability of Seller and its directors, officers, employees, consultants and other representatives, arising out of or resulting from any business, activity, course of conduct, action or omission before, on or before the Closing Date;

(iv)    all accounts payable of the Seller;

(v)    any liability or obligation under or in connection with the Retained Assets;

(vi)    any federal, state, local or other foreign tax payable by the Seller whether such tax is due and payable prior to or after the Closing Date, including but not limited to the obligations to the State of California, Employment Development Department (the “California Liabilities”) in respect of state unemployment taxes in the approximate amount of $1,450,000. The California Liabilities are guaranteed by Joseph Raymond, Sr. and Michael Maltzman and pursuant to separate agreement, ALS, LLC has agreed to remit up to $1 million to satisfy the California Liabilities;

(vii)    any indebtedness of the Seller for borrowed money;

(viii)    all liabilities of the Seller with respect to any claim, litigation or proceeding accruing with respect to, or arising from or relating to any business, activity, course of conduct, action or omission before, on or after the Closing Date, including, without limitation, those matters set forth on Schedule 2.9, whether such claim, litigation or proceeding is presented or instituted prior to or after the Closing Date;

(ix)    all warranty liability of the Seller, including without limitation, for claims which arise prior to the Closing Date, whether such claims are presented prior to or after the Closing Date; and

(x)    liabilities to employees for accrued, unpaid compensation, including, without limitation, vacation, paid time off and sick pay in the amount of $20,000 payable by credit to Buyer which credit will taken by Buyer in 2 equal installments of $10,000 against the amounts payable pursuant to the terms of Section 1.2 (a) hereof for the months of January 2006 and February 2006.

1.4.    Other Agreements

. As further consideration for the transactions contemplated hereby, the Seller will enter into a Non-Competition, Non-Solicitation and Confidentiality Agreement attached hereto as Exhibit C-1, and the Buyer will enter into a Non-Competition Non-Solicitation and Confidentiality Agreement, as attached hereto as Exhibit C-2.

1.5.    Closing

. The closing (the “Closing”) shall take place at the offices of the Seller in Manalapan, New Jersey, concurrently with the execution and delivery of this Agreement (the “Closing Date”). At the Closing the parties will exchange facsimile executed documents and they will promptly send each other originals.

1.6.    Allocation of Purchase Price

. The Purchase Price shall be allocated among the various Purchased Assets by mutual agreement of the parties as set forth on Schedule 1.6. The parties covenant and agree with each other that this allocation was arrived at by arm’s length negotiation and that none of them will take a position on any income tax return, before any governmental agency charged with the collection of any income tax or in any judicial proceeding that is in any manner inconsistent with the terms of this Section 1.6 without the written consent of the other parties to this Agreement. Each of Buyer and Seller covenant and agree to execute and timely file U.S. Treasury Form 8594 consistent with Schedule 1.6, and upon a party’s reasonable request the other party shall execute and file such other documents as may be necessary to document such allocation.

1.7.    Payment to the Buyer

. On or before April 15, 2005, Seller shall pay to Buyer an amount equal to the Seller’s (and its affiliates) including interest and/or discount fee to obtain and carry the financing obtained by Buyer to refinance, purchase or otherwise satisfy the obligations of the Buyer to Capital TempFunds, a division of Capital Factor L.L.C. (“Capital”), with respect to the CA Branch Offices. This payment shall be made by Seller within ten days after delivery by Buyer of a statement of such financing costs.

2.    Representations of the Seller. The Seller represents and warrants to the Buyer as follows:

2.1.    Organization

. The Seller is a corporation and is duly organized, validly existing and in good standing under the laws of the State of Delaware. The Seller is duly qualified or licensed to do business as a foreign corporation or other organization in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification necessary, except such jurisdictions, if any, in which the failure to be so qualified or licensed will not have a material adverse effect on the conduct of its business or use of any of its properties or assets. The Seller has all requisite, power and authority (corporate and other) to carry on its business as now conducted and to own, lease and operate its properties. The Seller has delivered to the Buyer complete and correct copies of the Seller’s Articles of Incorporation and By-laws as in effect on the date hereof. The Seller is not in default under or in violation of any provision of its Articles of Incorporation or By-laws. The Seller has all requisite power and authority (corporate and other) to execute and deliver this Agreement and the documents, instruments and agreements contemplated herein, and to consummate the transactions contemplated hereby and thereby.

2.2.    Affiliates and Other Equity Investments

. The Seller does not own, directly or indirectly, any shares of capital stock of any corporation or any equity investment in any partnership, limited liability company, association or other business organization, other than a fifty percent (50%) interest in Stratus Technology Services, LLC (“STS”).

2.3.    Authorization

. The Seller has the power to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement, and the agreements provided for herein by the Seller, and the consummation by the Seller of all transactions contemplated hereby and thereby, have been duly authorized by all requisite corporate action. This Agreement and all such other agreements and obligations entered into and undertaken by Seller in connection with the transactions contemplated hereby constitute the valid and legally binding obligations of the Seller, enforceable against the Seller in accordance with their respective terms.

2.4.    No Violation

. Except as set forth in Schedule 2.4, neither the execution, delivery or performance of this Agreement and the documents, instruments and agreements provided for herein, nor the consummation of any of the transactions contemplated hereby or thereby (i) will violate or conflict with the Articles of Incorporation or By-laws of Seller, or (ii) conflict with, result in any breach of, constitute (with or without due notice or lapse of time or both) a default under, or result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require notice, consent or waiver under any provision of any contract or agreement of any kind to which the Seller is a party or by which the Seller is bound (including, without limitation, the Contracts) or to which any property or asset (including, without limitation, the Purchased Assets) of Seller is subject, (iii) is prohibited by or requires the Seller to obtain or make any consent, authorization, approval, registration or filing under any statute, law, ordinance, regulation, rule, judgment, decree or order of any court or governmental agency, board, bureau, body, department or authority, (iv) will cause any acceleration of maturity of any note, instrument or other obligation to which Seller is a party or by   which Seller is bound or with respect to which Seller is an obligor or guarantor, or (v) will result in the creation or imposition of any lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever upon or give to any other person any interest or right (including any right of termination or cancellation) in or with respect to any of the properties, assets (including, without limitation, the Purchased Assets), business, agreements or contracts (including, without limitation, the Contracts) of Seller.

2.5.    Financial Statements

. Seller has delivered to Buyer audited financial statements, for the annual period ended September 30, 2004, and unaudited financial statements, for the nine months ended June 30, 2005, for the Seller’s operations as a whole. Such financial statements fairly present the financial position of Seller as of the date thereof and the results of its operations and cash flows for the period indicated.

2.6.    No Undisclosed Liabilities

. Since September 30, 2004, except for the transactions contemplated by this Agreement and except as set forth in Schedule 2.6, Seller has not incurred any material liability or obligation (absolute, accrued, contingent or otherwise) of any nature, other than liabilities and obligations incurred in the ordinary course of business.

2.7.    Absence of Certain Changes

. Since September 30, 2004, except for the execution and delivery of this Agreement and except as set forth in Schedule 2.7, Seller has not (i) had any change in its condition (financial or otherwise), operations (present or prospective), business (present or prospective), assets or liabilities, other than changes in the ordinary course of business, none of which has been materially adverse; (ii) incurred or agreed to incur any indebtedness for borrowed money; (iii) paid or obligated itself to pay in excess of ten thousand dollars ($10,000) in the aggregate for Fixed Assets; (iv) suffered any substantial loss or waived any substantial right; (v) agreed to sell, transfer or otherwise dispose any of the Purchased Assets; (vi) mortgaged, pledged or subjected to any charge, lien, claim or encumbrance, or agreed to mortgage, pledge or subject to any charge, lien, claim or encumbrance, any of the Purchased Assets; (vii) made or permitted any material amendment or termination of any Contract, license or permit to which it is a party other than in the ordinary course of business; (viii) experienced any shortage or difficulty in obtaining qualified personnel to meet customer orders, demands and requirements; (ix) made any change in its accounting methods or practices with respect to its condition, operations, business, properties, assets or liabilities; or (x) entered into any transaction not in the ordinary course of the business.

2.8.    Title; Ownership, Condition and Adequacy of the Assets

. Except with respect to Purchased Assets that are leased and except as set forth in Schedule 2.8, Seller has good and marketable title to all of its respective properties and assets included in the Purchased Assets, and valid leasehold interests in all such Purchased Assets leased by it under any personal property lease, in each case free and clear and not subject to any mortgage, pledge, conditional sales contract, lien, security interest, right of possession in favor of any third party, claim or other encumbrance, except for Permitted Liens. Seller is the sole owner or the sole lessee of all the Purchased Assets. The Fixed Assets are in good operating condition and repair, subject only to the ordinary wear and tear. Schedule 2.8 sets forth an accurate, correct and complete list of all of the Fixed Assets owned or used by the Seller with respect to the Purchased Assets. As used herein, the term “Permitted Liens” means (i) liens or encumbrances set forth on Schedule 2.8 for taxes not yet due or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of Seller; (ii) carrier’s, warehousemen’s, mechanic’s, materialmen’s, repairmen’s or other like liens or encumbrances arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of Seller; and (iii) those liens or encumbrances described on Schedule 2.8 attached hereto.

2.9.    Litigation

. Except as set forth in Schedule 2.9, there are no actions, suits, proceedings or investigations, either at law or in equity, or before any commission or other administrative authority in any United States or foreign jurisdiction, of any kind now pending or, to the best of Seller’s knowledge, threatened involving Seller that (i) if asserted and decided adversely to Seller, could materially and adversely affect the use or operations of the Purchased Assets (in a manner consistent with Seller’s past practices), or (ii) questions the validity of this Agreement or the other agreements to be entered into in connection herewith, or (iii) seeks to delay, prohibit or restrict in any manner any action taken or contemplated to be taken by the Seller under this Agreement or the other agreements to be entered into in connection herewith. Except as set forth in Schedule 2.9, there is no arbitration proceeding pending or, to Seller’s knowledge, threatened or proposed in any manner under any collective bargaining agreement or other agreement or otherwise. Neither Seller nor any of the Purchased Assets are subject to any judicial or administrative judgment, order, injunction, decree or restraint.

2.10.    Real Estate . All real property leased by the Seller as tenant or lesseee with respect or in connection with the CA Branch Offices is identified on Schedule 2.10. Such real properties constitute all of the physical locations necessary to operate and use the Purchased Assets as presently used by the Seller. Each lease (whether written or oral, expired or otherwise) with respect to each such property is set forth on Schedule 2.10. The Seller has made available to the Buyer a true and correct copy of each written lease and a true, correct and complete written description of each oral lease is set forth on Schedule 2.10. Except as set forth on Schedule 2.10, (i) each such lease is in full force and effect and neither the Seller nor, to the best knowledge of the Seller, any other party thereto, is in default under or in breach or in violation of any such lease, and all rent due and payable thereunder has been paid to date, and (ii) no circumstances presently exist which (with or without notice, lapse of time or both), would constitute a default, breach or violation by Seller, or, to the best knowledge of the Seller, by any other party thereto.

2.11.    Tax Matters

. All federal, state, local and foreign tax and information returns required to have been filed prior to the date of this Agreement by Seller have been duly filed, and each such return correctly reflects the income, franchise or other tax liability and all other information required to be reported thereon, and the Seller has paid or accrued all income, franchise and other taxes due by it as reflected on said returns. There are not pending, nor to the knowledge of Seller, threatened, any audits, examinations, investigations or other proceedings in respect of taxes or tax matters and there are not, to the knowledge of Seller, any unresolved questions or claims concerning Seller’s tax liability.

2.12.    Contracts

. Schedule 2.12 contains a true and complete list of all Contracts. The Seller has made available to the Buyer a true and complete copy of each such written Contract and a true, correct and complete written description of each such oral Contract is set forth on Schedule 2.12. Except as set forth as Schedule 2.12, neither the Seller, nor, to the knowledge of the Seller, any other party, is in default under or in breach or in violation of any Contract, nor has an event occurred that (with or without notice, lapse of time, or both) would constitute a default, breach or violation by the Seller, or, to the best knowledge of the Seller, by any other party, under any Contract.

2.13.    Compliance with Agreements and Laws

. Except as set forth in Schedule 2.15, Seller has complied in all material respects with all federal, state, local and foreign statutes, laws, ordinances, regulations, rules, permits, judgments, orders or decrees applicable to it, and to Seller’s knowledge there does not exist any basis for any claim of default under or violation of any such statute, law, ordinance, regulation, rule, judgment, order or decree except such defaults or violations, if any, that in the aggregate do not and will not materially and adversely affect the Purchased Assets or the operation, use, financial condition or prospects of the Purchased Assets.

2.14.    Environmental Matters

. Except for such matters that, alone or in the aggregate, are not reasonably likely to have a material adverse effect on the Seller or any of the Purchased Assets, (i) Seller has complied with all applicable “Environmental Laws” (as defined below); (ii) Seller has not received any notice, demand, letter, claim or request for information alleging that it may be in violation of or liable under any Environmental Law; and (iii) Seller is not subject to any orders, decrees, injunctions or other arrangements with any governmental entity relating to liability under any Environmental Law or relating to Hazardous Substances.

For purposes of this Agreement, the term “Environmental Law” means any law relating to pollution (or the clean up of the environment), or the protection of air, surface water, groundwater, drinking water, land (surface or subsurface), human health, the environment or any othe